Google's Big New Cloud Play: Should Microsoft Be Afraid?

CIO —

Late last week, Google (GOOG) made another aggressive move to stay ahead of Microsoft (MSFT) in the online productivity tools space by acquiring DocVerse, a startup founded by two former Microsoft employees, known for tools that let users collaborate on Microsoft Office files on the Web.

Google nabbed the three-year-old, San Francisco-based DocVerse for $25 million, according to the Wall Street Journal. What Google gets in return is the technology to make Microsoft Office operate more like Google Docs.

DocVerse provides a 1MB plug-in to Office 2007 that allows users to edit and share Word, Excel and PowerPoint documents online and in real-time with all the features of the Office client versions intact.

Ironically, the acquisition gives Google the authority to let users access full-featured Office files in a Web-based environment before Microsoft does.

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Google plans to add the DocVerse functionality to Google Apps for free, but it has not announced when that will take place. Yet one thing's for sure: Google is giving Microsoft no breathing room in the race to bring cloud-based productivity tools to businesses. Just yesterday, Google unveiled an online store called Google Apps Marketplace, where enterprises can buy cloud-based applications designed to work with Google's own apps.

A Body Blow to Microsoft

It's worth noting that Microsoft already provides the same kind of online-collaboration capabilities as Docverse via its free Office Live Workspace service. But this is an offering that Microsoft has barely marketed, likely because with the upcoming Office 2010, arriving in June (May 12 for businesses), Microsoft will include Office Web Apps. These are free, stripped-down online versions of Word, Excel, PowerPoint and OneNote. If users want the full features of Office 2010 they will still have to buy the full Office 2010 desktop suite.

While Microsoft still has an undeniable lead in the productivity tool space, especially at enterprises, the latest moves by Google turn up the heat. Just as Steve Ballmer anounced Microsoft's "all in" commitment to cloud computing last week, Google comes along and integrates online collaboration with Office docs through its own established cloud-based productivity suite and opens up a apps store for businesses.

"I'd say this [Google's Docverse buy] was a body blow to Microsoft," says veteran industry analyst Roger Kay. "Microsoft has to respond as best it can, whether shipping Office 2010 earlier or pushing Office Web Apps more, or both."

Chasing Google's Web Apps

Office still remains Microsoft's main cash cow, along with Windows. It generates 90 percent of the revenue for Microsoft's business division. However, the Office suite faces a variety of growing threats, not only from Google Apps, but also from IBM (IBM) with LotusLive iNotes and Oracle (ORCL) with its newly announced "Cloud Office."

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